Last week, shares in the carrier were at the $19.50 range, but following the revised forecast, its share price fell dramatically on the New York Stock Exchange and was at $17.54 in early trading on Wednesday.
Sprint Nextel has had a turbulent year financially, which it has blamed on disposal and merger costs as it struggles to combine the separate entities of Sprint and Nextel.
Sprint was a strong player in the consumer market, while Nextel Communications Inc was more popular with the business community thanks to its innovative press-to-talk feature that allowed mobile phones to function as a walkie-talkie.
On Monday the Reston, Virginia-based carrier stuck to its full-year 2006 forecast, and said that it expected revenue of approximately $41bn, with total capital expenditures estimated to be between $7bn and $7.3bn.
It said it added 742,000 total net subscribers during the fourth quarter, and ended the period with a customer base of 53.1 million. It lost 306,000 postpaid customers in the quarter, with its churn rate at 2.3%. The market continues to worry that Sprint is losing ground to its larger rivals Verizon Wireless and Cingular.
Sprint Nextel ending 2006 in a solid financial position, said its chairman and CEO Gary Forsee. We expect our full-year projected financial status will be in line with our prior guidance, and we remain on or ahead of plan in integrating our pre-merger operations, systems, and product and service line-up.
However, the carrier’s operational performance has been under severe pressure of late, especially as the carrier is committed to spending about $8.5bn to add more cell sites in order to improve call quality, as well as building-out of its WiMAX network, which it hopes to reach 100 million people in 2008. These costs will impact profitability, and Forsee has said he will adjust the carrier’s cost structure, including a workforce reduction. Sprint Nextel will cut another 5,000 positions and expects to incur approximately $700m in merger integration and severance costs in 2007.
The outlook for 2007 looks equally gloomy. It expects revenue in 2007 of $41bn to $42bn. The revenue growth from a larger subscriber base is expected to be offset by lower average revenue per subscriber and lower wireline revenues. Sprint predicted 2007 operating profit, excluding depreciation and amortization, of $11bn to $11.5bn. It also said it is on course to achieve $14.5bn in net merger synergies.
